Best way to buy pension

Freecall

I would be interested on the views of others on the best way to spend £9,500 with the intention of maximising wealth in retirement.

Situation : Married couple both aged 56, both intend to retire at 57, both good health, both ISA'd out for many years, both 36 years NI.


Option A

Buy additional pension in female’s (state run) final salary scheme.

Benefit £500pa, CPI linked, no partner benefits, all guaranteed.


Option B

Make contribution to male’s independent pension scheme which would be £11,875 after tax and start drawdown at 4.2%.

Benefit £500pa initially, no guarantees of course but sustainable-? drawdown figure.


BUT : Female will be basic rate tax payer in retirement, male will have personal allowance to spare (until the state pension kicks in at age 66).

At first glance Option A looks very inviting but after tax the benefit is only £400 whereas Option B gives more cash but leaves an exposure to many risks (including legislative risk) as to what might happen in 9 years time when probably part of the income will be exposed to tax.

As they used to say when I was at school - Discuss.

quotememiserable

The first one looks like a massive winner to me. Index linking is worth a lot. If inflation is 3%, at age 80 that one is £1000pa - could you possibly get that out of your drawdown? You need a strong investment return.